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Taxation, Labour Supply and Saving

Patricia Apps () and Ray Rees

No 590, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: In recent years, the US, UK and Australia have lowered tax rates on high incomes and expanded tax credits and family transfer payments that are withdrawn on the joint income of a couple. These reforms result in significant changes in the structure of marginal and average income tax rates. In this paper we present a case study that examines the impact of reforms of this kind on the structure of tax rates on incomes in Australia. We find that the reforms have led to high effective marginal rates across a wide middle band of earnings and to a shift towards joint taxation. As is well known, joint taxation results in high tax rates on secondary earners, with in consequence undesirable effects on both work incentive and fairness of the income distribution. A lifecycle analysis of time use and saving decisions indicates strong negative effects on female labour supply and household saving.

Keywords: Income taxation; family benefits; time allocation; labour supply; lifecycle saving; household production (search for similar items in EconPapers)
JEL-codes: D91 H24 H31 I38 J16 J22 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-acc, nep-lab and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:auu:dpaper:590

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